DangInvestor provides two interactive valuation dashboards – one for each of the independent business analysis and valuation module.

Each dashboard standardised the approach to valuation and a useful visualisation tool to quickly gauge the company’s current price, its approximate value and current market sentiment.

quick.Look is a simple, mechanical, valuation of reported earnings based on various standard valuation models. While this standardized the valuation metrics across all companies – not permitting the changing of the rules to fit the sentiment – a quick.Look is just that: the beginning of a proper investment decision process requiring detailed analysis and adjustments to reported figures and averages in the detailed analysis module.

 

INTERACTIVE DESIGN

The dashboards are multi-layered and its interactive design can be use to add or remove the various layers to see how certain models value the company over time compare to the current market and your own valuation.

Some key features include:

  1. Chart Type:

Select radio button for entire enterprise value or on a per share basis.

  1. Current Share Price:

Enter current share price, number of shares, click SAVE & CHART PRICEand DangInvestor will chart a constant line for this current market price to put it price and implication in perspective.

Use drop down combo box to automatically update selected year’s reported common shares outstanding.

  1. Legends and Series

Click checkboxes in the legend to select or de-select data series to chart.

Series charted will automatically adapt to either per share or entire enterprise value.

By default, DangInvestor has selected series that show price within reasonable range of value. When the constant line for current market price is not visible on first load, click the legend for series with higher PE or higher growth estimates than normal to see this market price implication.

In general, we believe if the line is off the chart, it might be too much of a speculation and the investor ought to either ignore the company for now or to study further into the company and the industry in greater detail to see if assets or growth prospects actually warrant such optimism.

 

VALUATION MODELS

P/E Model
  • Price = Earnings x PE Ratio
  • Following Graham’s advice we automate two ranges, standard 8 to 12 times earnings; then 13 to the highest multiple recommended of 20.

 

Benjamin Graham’s Valuation Model

In The Intelligent Investor, Benjamin Graham describes a formula he used to value stocks.

                                    Intrinsic Value = Earnings x (8.5 + 2g)

Where

  • 8.5 = P/E base for a no-growth company
  • g = reasonably expected annual growth rate over 7 to 10 year (written as 10 for 10% etc.)
  • Note that while a later revision in 1974 took into consideration high-grade corporate bond’s yield, we find this earlier shorthand to be of greater use for its purpose.

 

Book Value is based on Graham’s definition:

Total Tangible Assets minus Total Liabilities, minority interests and preference shares.

 

Liquidating Value (LV)

LV = All assets minus all liabilities with the following adjustments to certain assets under a low or high range scenario:

  • LOW:100% cash; 75pc receivables and other, 50% inventory, 100% land, 15%(PE, intangibles, other nca)
  • HIGH:100% cash; 90pc receivables and other, 75% inventory, 100% land, 25%(PE, intangibles, other nca)
  • Note: exclude long term assets held for sale.

 

Note Buffett's valuation at $400M and DangInvestor's quickEstimates.
Note Buffett’s valuation at $400M and DangInvestor’s quickEstimates.

 

 

KEY ASSUMPTIONS

quick,Look valuation dashboard assumes that the reported earnings are the company’s actual earning power for the year. Here the aim is to provide a quick overview as to company’s financial position and historical performance. The price and valuation is to simply gauge whether this or other opportunities are more interesting and should be given a closer look.

The investor should follow Graham’s advice and take an average over three to five years. Make the required adjustments in regards to current as well as future, normalised, revenues and expenses; growth potential etc.

These can be done in the detailed analysis section of DangInvestor.

TIPS:
  • Could be favourable if you can’t read the constant line text due to historical bar chart pricing estimates and the recent estimates are higher (or better yet, rising). That is, the current period is to the far right and if current value is crowded by older values.
  • However, note that if can’t read but recent years earnings also decline… need to look at bookvalue and see reason for earning decline.
NOTE
  • Important to note that quickLook assumes reported earnings and so do not need adjustments; assumes reported earnings for each year are representative of the company’s earning power; assumes that the latest reported earnings points to similar future development.
  • In other words, many assumptions are made in quick gauge. It is important that the investor use the chart as intended, understand the assumptions, and together with further study and insight into the company and its industry, make more appropriate adjustments to earnings and interpretation.
  • While we believe that after a thorough understanding of the business and its industry, analysis and updates at future dates, together with an appropriate appreciation for buying at a good margin of safety, the investor may not need to study the company again in such detail as ought to be done at first encounter.
  • These adjustments can be made in the detailed section of business analysis and valuation.
NOTE II
  • A slight difference between per share and whole enterprise value due to rounding.
  • When in full Enterprise Value mode, the gauger uses both the share price and the number of share figures to calculate enterprise value… when in per share mode, it only use the share price.

 

IMPLIED VALUE DASHBOARD

Based on the same design principle and features as quickEstimate Dashboard, Implied Value Dashboard sourced its financial data from those entered at the main Data Entry page.

In quickEstimate the full enterprise values were based on the full net profit reported while the per-share value based on the reported earnings per share figure. In this Implied Value dashboard, both the basic shares outstanding as well as results if shares were diluted with options and preference shares are taken from the figures recorded in the detailed financial performance grid.

Further, instead of automatically calculating an approximate number of outstanding shares, here the chart relies on the recorded figures for greater accuracy when calculating both the implied market price and whole enterprise value based on the per share pricing figures.

 

bni valimp

 

 

Significant features difference to quickEstimate includes:

Market Price during the Year:

  • Based on the reported share prices during the year and the number of shares outstanding, the dashboard calculate the implied full enterprise value

 

Main & Secondary Value Range estimates:

  • The two strip series source its data from the investor’s own estimates of value under various scenarios in the Valuation module.
  • This visualisation put together various valuations into context: from Graham’s general rule of thumb to the market’s price and its implied value – all placed into context against the company’s book value, its net tangible assets and the user’s own estimates.